Standard Life UK Smaller Companies Trust plc

Capturing the growth potential of UK smaller companies


Morningstar rating:
5 out of 5

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Latest news

An update from our investment manager, Harry Nimmo - 14 October 2020

The resurgence of Covid in a second wave, if anything, has been helpful to our Matrix led, Quality, Growth and Momentum process. In essence, the trend towards cyclical recovery has been postponed for the time being. The sector winners and losers tend to be the same as in the previous three to six months. The beneficiaries have been in sectors like leisure goods, media, financial services, telecoms, software and healthcare. Some support service, construction and industrial sectors have also seen some recovery. Many of the constituents of the aforementioned sectors have reinstated their dividend along with upbeat trading statements. Weaknesses have been in transport & leisure, real estate, oil & gas, retailers and mining. Food manufacturing, while trading well has seen some profit taking since the early days of Covid.

Within the fund, the standout sector has been leisure goods where Games Workshop, Team17 and Focusrite in hobby games, computer games and techno-music kit have traded strongly given they have been well suited to the social distancing environment. Financial services, particularly fund administration (Sanne, JTC), wealth management (Mattioli Woods, Impax, Brooks Macdonald) and asset platforms (AJ Bell, Integrafin) have all adapted well to working from home and the strong recovery in equity markets. Likewise, software is well suited to remote working and in particular the continued trend toward digitalisation (Kainos, First Derivatives, GB Group and FDM). Media has fared well under Covid with the current crop of companies generally having better visibility of earnings. These would include Future plc, GlobalData and YouGov. Our telecoms stocks have remained in good shape - Gamma Communications in particular has performed well whilst providing services to those working at home. In the large support services sector it has been a more mixed picture with language translator RWS, Diploma in specialist distribution and Alpha FMC in consultancy having prospered, while Ricardo (auto engineering), Robert Walters (recruitment) and Midwich (audio-visual technology) have struggled. In electronics, XP Power in power converters recently came out with a strong trading statement and DiscoverIE in electronic subsystems has also been trading well. It is also the case that many of the above companies are upgrading forecasts and reinstating their dividends. 

There are however seven holdings making up about 8% of the fund that have continued to be impacted by Covid-19. These stocks are generally in leisure and restaurants or food to go. They are Jet2, Trainline, 4imprint in sales promotion, Hotel Chocolat, Greggs, Workspace and Hollywood Bowl. The good news is that these companies have strong balance sheets and we believe that they will see out an extended lockdown, coming out the other side able to gain share from weaker competitors. Counter-intuitively the fund is overweight real estate, a sector being hit hard by Covid. The two self-storage businesses; Big Yellow and Safestore have continued to trade well, as has Sirius Real Estate who own and manage mixed industrial space in Germany. Workspace, the managed work centre company, however, is seeing tenants under pressure. It does however have a robust balance sheet. The fund does not invest in oil & gas, mining, industrial minerals and chemicals - sectors that remain under intense pressure. 

My view is that the 19th March was the turning point for markets and indeed the early recovery phase in what is normally a very strong period for economically sensitive small-caps.  A major trend has also been the resurgence of technology stocks through digitalisation, the facilitating of working from home, cloud computing, digital media and online retailing. In the US, it is the FAANGs that have led the charge. In the UK, it is the Alternative Investment market (AIM) that is at the forefront. AIM has come of age with a majority of the leading companies in growth mode with strong profit generation and many of them paying dividends. They are in general the new businesses that have benefitted from the work from home, social distancing Covid environment.  The leading AIM stocks are made of the UK’s most innovative growth stocks with the top ten including ASOS, Fevertree Drinks, Keywords Studio, Gamma Communications, Abcam and GB Group. It is no wonder that AIM (+3.7%) has massively out-performed the FTSE100 (-20.4%) year to date as well as the FTSE Smallcap (ex-IT) (-19.8%) and (-17.0) indices. (numbers are to 13/10/20, source Bloomberg).

The current environment of major monetary and fiscal stimulation and incredibly low interest rates remains positive for equities and smaller companies in particular. At some stage, however, there will be a resurgence of the cyclical elements in the market, when an end to Covid becomes clear. At that point, our quality, growth and momentum process will under-perform a rising market for a number of weeks. This does not detract from the veracity of the process. We have been through four market cycles and we know that our investment process remains valid into the future. I remain most positive about smaller companies and our investment process. 

Profile

The Company intends to achieve its investment objective by investing in a diversified portfolio consisting mainly of UK-quoted smaller companies. The portfolio will normally comprise around 50 individual holdings representing the Investment Manager’s highest conviction investment ideas. In order to reduce risk in the Company without compromising flexibility, no holding within the portfolio should exceed 5% of total assets at the time of acquisition.

The Company may use derivatives for portfolio hedging purposes (i.e. only for the purpose of reducing, transferring or eliminating the investment risks in its investments in order to protect the Company’s portfolio).

Within the Company’s Articles of Association, the maximum level of gearing is 100% of net assets. The Directors have set parameters of between 5% net cash and 25% net gearing (at the time of drawdown) for the level of gearing that can be employed in normal market conditions. The Directors have delegated responsibility to the Investment Manager for the operation of the gearing level within the above parameters.

The Investment Manager’s investment process combines asset allocation, stock selection, portfolio construction, risk management, and dealing. The investment process has evolved out of the Investment Manager’s “Focus on Change” philosophy and is led by Quality, Growth and Momentum. The Investment Manager’s stock selection led investment process involves compiling a shortlist of potential investments using a proprietary screening tool known as “The Matrix” which reflects Quality, Growth and Momentum based factor analysis. The final portfolio is research intensive and includes face to face meetings with senior management of these potential investments. This disciplined process has been embedded for many years and has delivered a consistency of performance through economic and market cycles.

Key people

Harry Nimmo

Harry Nimmo

Investment Director

Harry graduated with an MBA from the University of Edinburgh in 1984 and joined Standard Life as an Investment Analyst with responsibility for UK equity funds in 1985. He became Senior Investment Analyst with sector responsibility for larger UK-quoted companies funds in 1990 and Investment Manager responsible for the UK equity smaller (quoted) company funds in 1993.
Abby Glenie

Abby Glennie

Investment Director

Abby Glennie is an Investment Director at Aberdeen Standard Investments. She is responsible for UK Opportunities, Smaller Companies Pension Fund, and Bothwell Smaller Companies fund. Abby joined Standard Life in 2013 from Kames Capital where she was an Investment Analyst

Abby graduated with a joint 1st MA, in Economics and Finance from University of Aberdeen and is a CFA charterholder.

Amanda Yeaman

Amanda Yeaman

Investment Manager

Amanda is an Investment Manager at Aberdeen Standard Investments. Amanda is responsible for providing research support predominantly for our UK Smaller Companies strategy but also to the wider Smaller Companies team. Amanda Joined the company in June 2019 from Investec Securities where she was a small and mid-cap equity sales specialist.

  • Harry Nimmo

    Investment Director

    Harry graduated with an MBA from the University of Edinburgh in 1984 and joined Standard Life as an Investment Analyst with responsibility for UK equity funds in 1985. He became Senior Investment Analyst with sector responsibility for larger UK-quoted companies funds in 1990 and Investment Manager responsible for the UK equity smaller (quoted) company funds in 1993.
  • Abby Glennie

    Investment Director

    Abby Glennie is an Investment Director at Aberdeen Standard Investments. She is responsible for UK Opportunities, Smaller Companies Pension Fund, and Bothwell Smaller Companies fund. Abby joined Standard Life in 2013 from Kames Capital where she was an Investment Analyst

    Abby graduated with a joint 1st MA, in Economics and Finance from University of Aberdeen and is a CFA charterholder.

  • Amanda Yeaman

    Investment Manager

    Amanda is an Investment Manager at Aberdeen Standard Investments. Amanda is responsible for providing research support predominantly for our UK Smaller Companies strategy but also to the wider Smaller Companies team. Amanda Joined the company in June 2019 from Investec Securities where she was a small and mid-cap equity sales specialist.

Liz Airey

Liz Airey

Chairman

Liz was appointed as a Director on 21 August 2019 and was appointed Chairman on 1 April 2020. She also chairs the Nomination Committee. She is currently a non-executive director of Kirk Lovegrove & Company Limited, a member of the Investments Committee of the Institute of Chartered Accountants in England and Wales, and Chair of Trustees of the Rolls-Royce UK Pension Fund. She has previously been the non-executive Chairman of Jupiter Fund Management plc, a non-executive director of Tate & Lyle plc, Dunedin Enterprise Investment Trust plc, JP Morgan European Smaller Companies Trust plc, Zetex plc and AMEC plc. In her executive career, Liz was Finance Director of Monument Oil and Gas plc, a post she held from 1990 until the sale of the company to Lasmo plc in 1999.

Ashton Bradbury

Ashton Bradbury

Director

Ashton was appointed as a Director on 2 July 2018. He has previously held roles at Charterhouse Tilney, Hill Samuel Investment Management and HSBC Asset Management Europe and was, until 2014, a fund manager with Old Mutual Global Investors Limited, where he established its Small and Mid Cap equities team. Ashton is currently a non-executive Director of Hargreave Hale AIM VCT plc and is a director of Golf Union of Wales Limited. Ashton holds a BSc in Banking and Finance from Loughborough University of Technology.
Alexa Henderson

Alexa Henderson

Director

Alexa was appointed as a Director on 8 October 2018. Alexa has over 30 years’ experience in finance, accounting and audit having worked with KPMG, Arthur Andersen and Deutsche Bank (WM Company). She is currently a non-executive Director of BMO Real Estate Investments Limited and Chairman of JP Morgan Japan Smaller Companies Trust PLC. In addition, Alexa sits on the board of James Walker(Leith) Limited and Bravura Solutions Ltd, incorporated in Australia. Previous directorships include Scottish Building Society (which she chaired for 4 years) and Adam & Company Group PLC (a private wealth subsidiary of RBS). Alexa Henderson holds a BSc in Economics and Accounting from Edinburgh University and is a Chartered Accountant .
Caroline Ramsay

Caroline Ramsay

Director

Caroline was appointed as a Director on 22 August 2016 and is Chair of the Audit Committee . Caroline is currently a member of the Supervisory Board of Aegon NV and was previously a non-executive Director of Aegon UK PLC, Scottish Equitable plc, Scottish Equitable Holding Ltd and Cofunds Ltd. She is a non-executive director of Tesco Underwriting Limited and Brit Syndicates Limited and is a member of the Financial Conduct Authority’s Regulatory Decisions Committee. Until June 2015, Caroline was the Group Chief Auditor for RSA plc having held previous senior positions at RSA plc including UK Chief Financial Officer. After qualifying and practising as a chartered accountant with KPMG, she held various roles within Aviva Plc.
Tim Shoefield

Tim Scholefield

Director

Tim was appointed as a Director on 20 February 2017 and is the Company’s Senior Independent Director. He also chairs the Management Engagement Committee. Tim is an Associate of the Society of Investment Professionals and previously held roles at Royal Sun Alliance Investments and Scottish Widows Investment Partnership. He was, until 2014, Head of Equities at Baring Asset Management. Tim is currently Chairman of City Merchants High Yield Trust Ltd, a non-executive Director of BMO Capital and Income Investment Trust Plc and Fidelity Asian Values Plc. In addition, he is a member of the Investment Committee of the General Medical Council, a non-executive director of Jupiter Unit Trust Managers Ltd and a consultant to Gresham House Asset Management.
  • Liz Airey

    Chairman

    Liz was appointed as a Director on 21 August 2019 and was appointed Chairman on 1 April 2020. She also chairs the Nomination Committee. She is currently a non-executive director of Kirk Lovegrove & Company Limited, a member of the Investments Committee of the Institute of Chartered Accountants in England and Wales, and Chair of Trustees of the Rolls-Royce UK Pension Fund. She has previously been the non-executive Chairman of Jupiter Fund Management plc, a non-executive director of Tate & Lyle plc, Dunedin Enterprise Investment Trust plc, JP Morgan European Smaller Companies Trust plc, Zetex plc and AMEC plc. In her executive career, Liz was Finance Director of Monument Oil and Gas plc, a post she held from 1990 until the sale of the company to Lasmo plc in 1999.

  • Ashton Bradbury

    Director

    Ashton was appointed as a Director on 2 July 2018. He has previously held roles at Charterhouse Tilney, Hill Samuel Investment Management and HSBC Asset Management Europe and was, until 2014, a fund manager with Old Mutual Global Investors Limited, where he established its Small and Mid Cap equities team. Ashton is currently a non-executive Director of Hargreave Hale AIM VCT plc and is a director of Golf Union of Wales Limited. Ashton holds a BSc in Banking and Finance from Loughborough University of Technology.
  • Alexa Henderson

    Director

    Alexa was appointed as a Director on 8 October 2018. Alexa has over 30 years’ experience in finance, accounting and audit having worked with KPMG, Arthur Andersen and Deutsche Bank (WM Company). She is currently a non-executive Director of BMO Real Estate Investments Limited and Chairman of JP Morgan Japan Smaller Companies Trust PLC. In addition, Alexa sits on the board of James Walker(Leith) Limited and Bravura Solutions Ltd, incorporated in Australia. Previous directorships include Scottish Building Society (which she chaired for 4 years) and Adam & Company Group PLC (a private wealth subsidiary of RBS). Alexa Henderson holds a BSc in Economics and Accounting from Edinburgh University and is a Chartered Accountant .
  • Caroline Ramsay

    Director

    Caroline was appointed as a Director on 22 August 2016 and is Chair of the Audit Committee . Caroline is currently a member of the Supervisory Board of Aegon NV and was previously a non-executive Director of Aegon UK PLC, Scottish Equitable plc, Scottish Equitable Holding Ltd and Cofunds Ltd. She is a non-executive director of Tesco Underwriting Limited and Brit Syndicates Limited and is a member of the Financial Conduct Authority’s Regulatory Decisions Committee. Until June 2015, Caroline was the Group Chief Auditor for RSA plc having held previous senior positions at RSA plc including UK Chief Financial Officer. After qualifying and practising as a chartered accountant with KPMG, she held various roles within Aviva Plc.
  • Tim Scholefield

    Director

    Tim was appointed as a Director on 20 February 2017 and is the Company’s Senior Independent Director. He also chairs the Management Engagement Committee. Tim is an Associate of the Society of Investment Professionals and previously held roles at Royal Sun Alliance Investments and Scottish Widows Investment Partnership. He was, until 2014, Head of Equities at Baring Asset Management. Tim is currently Chairman of City Merchants High Yield Trust Ltd, a non-executive Director of BMO Capital and Income Investment Trust Plc and Fidelity Asian Values Plc. In addition, he is a member of the Investment Committee of the General Medical Council, a non-executive director of Jupiter Unit Trust Managers Ltd and a consultant to Gresham House Asset Management.

Financial calendar

Year End 30 June
Accounts Published August
Annual General Meeting October
Dividend Paid April, October

Trust details

Standard Life UK Smaller Companies Trust Plc

Registered Office:
1 George Street
Edinburgh
EH2 2LL

Registered in Scotland. Company number SC145455

Launch date: 9 July 1993

Risk Warning
Risk warning
The value of investments and the income from them can go down as well as up and you may get back less than the amount invested. Please refer to the relevant Key Information Document (KID) prior to making an investment decision. Please be aware of scams that can affect investors.